NZ dollar rises on superb job data

The New Zealand dollar is almost unchanged on Wednesday. Currently, NZD/USD is trading at 0.7193, up 0.04% on the day.

New Zealand employment data sparkles

The New Zealand dollar pushed above the 72 level early on Wednesday, in response to excellent employment numbers for Q4 of 2020. Indeed, it would not be an exaggeration to say that the numbers stunned the markets. Employment Change climbed 0.6%, a strong gain after two successive declines. This easily beat the consensus estimate of 0.1%. The real shocker was the unemployment rate, which dropped from 5.3% to 5.6%. The forecast stood at 5.6%.

The markets were clearly caught flat-footed by these superb job numbers. The New Zealand dollar shrugged off these numbers with limited gains, but these figures are significant. The well-respected Bank of New Zealand, one of the country’s largest banks, is forecasting that the Reserve Bank of New Zealand will raise interest rates in May 2022. Just a few months, ago, BNZ and other forecasters had projected that the central bank would trim rates. Sentiment has clearly changed regarding future monetary policy. In January, Capital Economics released a report which said that it expected the central bank to raise rates next year. With BNZ now on board, the market view of the bank’s future monetary policy has clearly shifted in a hawkish direction.

Are the markets correct that the RBNZ is changing course? We’ll hear from the RBNZ itself at the next policy meeting on February 24, an event that is sure to be closely watched. If the central bank hints at rate hikes to come, the New Zealand dollar could get a significant boost. At the same time, NZD/USD has surged in recent months, and the central bank does not want this upward trend to continue.

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NZD/USD Technical

NZD/USD continues to range-trade, as the support and resistance levels remain unchanged:

• NZD/USD faces resistance at 0.7251. This is followed by resistance at 0.7321
• There is support at 0.7109. Below, we find support at 0.7037
• The 50-day moving average (MA) is situated at 0.7121

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